Big Brother on wheels or a much fairer way of charging for car insurance?

Many motorists will be pondering that question after it emerged yesterday that Norwich Union is road-testing "revolutionary" technology that could mean insurance premiums are calculated according to how often, where and when people drive their cars.

The company's "pay as you drive" pilot scheme will see electronic devices fitted to 5,000 customers' cars across Britain.

The black box is smaller than a DVD case and is being installed in the vehicles' boots or passenger areas. The box records vehicle usage and sends the data back to the insurer using technology similar to that for mobile phones.

Norwich Union described it as "a major breakthrough in the development of more tailored motor insurance premiums, enabling us to treat all drivers as individuals".

But some drivers will doubtless see it as yet another incursion into their privacy, because it means the insurance company will always know where they are.

It appears that such fears are not widespread. Robert Ledger, the programme director for the scheme, said interest in the initiative had been phenomenal.

"We could have filled the pilot twice over with the amount of requests we have had from interested motorists, not just within the UK but from drivers around the world."

The pilot study will last for up to two years and once the findings are evaluated, Norwich Union will confirm whether "pay as you drive" insurance will become available to all customers.

The technology adapted for the scheme is ideal for the safety- and security-conscious motorist, the company said.

The black box has the capacity to locate a vehicle if it is stolen and will be able to inform the insurer immediately of any accidents.

The AA welcomed news of the pilot study but said drivers would need to consider carefully the implications before they signed up.